HONG KONG, March 27 (Reuters) - The Hong Kong stock exchange’s lengthy, often years-long trading suspensions are trapping investors into holding shares and can be costly for short sellers paying to borrow the stock, said the founder of U.S.-based short seller Muddy Waters LLC.

Carson Block also said in a telephone interview on Monday that his firm was working on exposing possible anomalies at two Hong Kong-listed firms before the pair publish their accounts.

The comments come after the stock of one of Muddy Waters’ targets, China Huishan Dairy Holdings Co Ltd, lost 85 percent of its value, or $4 billion, on Friday, with Huishan’s chairman reportedly blaming a short seller attack.

Such attacks by short sellers often trigger a suspension on the trading of the target company’s shares. Huishan’s shares were halted for just three days after a report from Muddy Waters in December, but due to various factors including current regulations, trade suspensions can last months or even years.

“The problem with the halts in Hong Kong is that they are very, very, very long,” Block said by phone on Monday. “So, once you get a halt that really stretches out, it becomes negative for many investors, because they just wont get their money out.”

Hong Kong currently has 50 trading halts stretching beyond three months, exchange data showed, including Superb Summit International Group Ltd which Muddy Waters shorted in 2014. By comparison, suspensions are resolved in less than a month in the United States, legal experts said.

Hong Kong’s exchange in May said it was considering revising suspension rules but has not published a formal proposal.

A revision could see firms that are subject to allegations have trading halts lifted if they make clarification announcements denying the allegations, for example, an exchange spokesman said in an emailed statement.

“The revised approach, which is closer to the regulatory approaches of other markets than the previous approach, keeps any necessary trading halt to the minimum,” the spokesman said.

Muddy Waters rose to prominence in 2012 for shorting Chinese firms listed in North America. It has also targeted companies based elsewhere in Asia, including Singapore-listed Noble Group Ltd and Olam International Ltd.

In December, it said China Huishan Dairy had inflated spending on cattle farms to artificially raise capital expenditure figures, and questioned the firm’s profit. Huishan said the allegations were groundless.

On Friday after the share plunge, Huishan said it would make an announcement as soon as practicable after completing enquiries. (Reporting by Umesh Desai; Editing by Christopher Cushing)